U.S. Department Of Energy Looks To Subsidize Coal Plants

On September 29, the US Department of Energy sent a proposal to the Federal Energy Regulatory Commission (FERC) that would, if adopted, significantly increase the value of aging coal and nuclear power plants.There are a number of interesting aspects to the DOE’s directive to the FERC. First, what surprised us was the tone of imminent crisis. “In light of these threats to grid reliability and resiliency it is the Commission’s immediate responsibility to take action….” But the only actual “threat” of any validity cited was the Polar Vortex of 2014 where natural gas supplies were limited in the U.S. north east.
The language of crisis, whether valid or not, also allows something else--the expedited regulatory and administrative treatment of this proposal. The DOE is asking the FERC to adopt sweeping rate making proposals in a relatively brief period of time, 60 days. We’d be surprised if the expedited calendar alone didn’t provide grounds for legal challenge and delay.
The DOE is directing FERC to make sure that it fully values a particular aspect of wholesale electricity power generation: the ability to keep 90 days of fuel supply on site. Only coal and nuclear plants can do that, not gas plants. The DOE’s language directs the FERC to value the reliability and resiliency features of generation with an onsite fuel supply.

Ultimately, the FERC retains legal responsibility for setting wholesale electricity rates. Whether they simply adopt the DOE’s plan remains to be seen. But DOE’s goal is to “eliminate the need for the commission to order and publish its own separate rulemaking proposal.”

If there is a resilience problem in the U.S. electrical grid, why would a pro-free-market administration require a significant economic intervention to improve resilience? This proposed rulemaking looks more like another instance of a central planning with the federal government (again) providing bail outs or heavy subsidies to failing industries.

Most coal mining is now heavily automated so even giving subsidies to coal power plants won't add many jobs. Assuming the subsidies can help coal compete with natural gas and other sources.

Economics Are Transitioning America From Coal To Clean

There is considerable hullabaloo about the future of coal in America: Can it be resuscitated by slashing environmental protections, per the Trump Administration, or is it on a secular decline due to economics and other forces? And what energy policy strategies make sense for this changing environment?

The short answer to the future of coal is that it has entered irreversible decline. The long answer has four parts:

In many regions of the U.S., it is no longer cost-effective to build a new coal-fired power plant. Mississippi’s Kemper County carbon-capturing coal plant was scheduled to cost $3 billion and go online by 2014, but still remains non-operational and is approaching $7 billion in total cost.

Increasingly, building a new solar or wind farm is cheaper than just operating an existing coal plant. The Navajo Generation Station, Western America’s largest coal plant, is closing in 2019 – decades earlier than expected as utilities recognize adding cheaper renewables (as well as gas and efficiency) would save consumers money.

As a consequence of these economics, coal will decline as a share of electricity production regardless of policy, but good policy will yield reductions much more quickly. We have already met four-fifths of the Clean Power Plan (CPP) emissions reduction requirements for 2030—but plenty of America’s coal plants are still steaming away.

What’s really causing coal’s decline? Is it driven by economics, or policy? Is coal being replaced by natural gas, or wind and solar, or energy efficiency? The default answer in the U.S. press is often that natural gas is simply cheaper than coal. This view has some legitimacy, but does not tell the full story.

First, U.S. electricity use has been flat for the last 11 years, even as GDP has grown 17%. This change, driven by energy efficiency and structural changes in the economy, is displacing coal almost as quickly as natural gas. Add wind and solar, whose capacity additions have been fiercely outpacing coal for the past several years, and clean energy gets nearly 60% of the credit.

The upshot is that coal is facing a formidable group of competitors, and losing to them all, mostly due to sheer economics: Efficiency, solar, wind, and natural gas are all cheaper on the margin than coal in many parts of the U.S. Some of this transition was driven by environmental protections, or their anticipation, but much is due to the age of coal plants, which in America now average more than 43 years old. Old plants require more maintenance, more new equipment, and run at lower efficiencies, consuming more fuel. Coal is, fundamentally, a 1970s energy strategy.

Looking at the level of individual businesses, the coal industry in 2014 (76,572) employed about as many as Whole Foods (72,650), and fewer workers than Arby's (close to 80,000), Dollar General (105,000) or J.C. Penney (114,000). The country's largest private employer, Walmart (2.2 million employees) provides roughly 28 times as many jobs as coal.

If anything the numbers above over-estimate the jobs impact of coal relative to other industries. Since 2014 the coal industry has shrunk further according to the Bureau of Labor Statistics, to 50,300 employees as of February 2017.

The point isn't that coal jobs don't matter — they matter to the people who have them and to the communities they support, especially as they typically pay far more than do jobs in the retail and service industries, But if you're looking to make a meaningful increase in the number of jobs available to U.S. workers, bringing back coal jobs isn't going to do it.

It may be a coincidence but the nuclear plant in South Haven, MI was planned to be closed next year. Employees have already been selling homes and being relocated by the company to other facilities across the country. It was just announced they expect to now stay open until 2022. The stated reason was a state decision on some bond handling but I wouldn't be surprised if this subsidy was the real reason.

* Enforce Border Security – America should be guarding her own borders and enforcing her own laws instead of policing the world and implementing UN mandates.

* No Amnesty - The Obama Administration’s endorsement of so-called “Comprehensive Immigration Reform,” granting amnesty to millions of illegal immigrants, will only encourage more law-breaking.

* Abolish the Welfare State – Taxpayers cannot continue to pay the high costs to sustain this powerful incentive for illegal immigration. As Milton Friedman famously said, you can’t have open borders and a welfare state.

* End Birthright Citizenship – As long as illegal immigrants know their children born here will be granted U.S. citizenship, we’ll never be able to control our immigration problem.

I don't see why that's surprising. You have an up front cost with solar and wind and after that its maintenance. Coal takes a lot of transportation although it appears it won't be cheaper globally until 2025 or so. https://www.bloomberg.com/news/artic...falls-to-solar

“…let us teach them that all who draw breath are of equal worth, and that those who seek to press heel upon the throat of liberty, will fall to the cry of FREEDOM!!!” – Spartacus, War of the Damned

It may be a coincidence but the nuclear plant in South Haven, MI was planned to be closed next year. Employees have already been selling homes and being relocated by the company to other facilities across the country. It was just announced they expect to now stay open until 2022. The stated reason was a state decision on some bond handling but I wouldn't be surprised if this subsidy was the real reason.

The original agreement committed Consumers Energy to purchase nearly all of the power that Palisades generates through April 2022. Under the plan now, Palisades will be refueled as scheduled in the spring of 2017 and operate through the end of the fuel cycle, then permanently shut down in late 2018.

Entergy said that since it purchased Palisades from Consumers Energy in 2007 "market conditions have changed substantially, and more economic alternatives are now available to provide reliable power to the region."

"The transaction is expected to result in $344 million in savings, $172 million of which is expected to lower Consumers Energy customers' costs over the early termination period from 2018 to 2022, and $172 million of which Consumers Energy will pay to Entergy for early PPA termination," the release said. "The early termination payment to Entergy will help assure the plant's transition from operations to decommissioning, maintaining our commitment to meet U.S. Nuclear Regulatory Commission requirements."

It is old and falling apart.

The 45-year-old Palisades plant, one of the country's oldest nuclear power plants, has been under elevated scrutiny from the federal regulators in recent years, with numerous unplanned shutdowns due to problems.

The Nuclear Regulatory Commission determined that the plant operated safely in 2015, but it was under increased NRC oversight for the first three quarters of 2015 due to its failure to accurately calculate radiation doses to workers during an activity in 2014. It began to receive the normal level of NRC oversight during the last quarter of 2015.

The plant's reactor is one of the most "embrittled" reactors at U.S. nuclear facilities, putting it at risk of cracking. The NRC in 2014 began a three-year review of results of tests on the reactor.